Items that are purchased in bulk quantities are used in a wide variety of manufacturing and assembly processes. For example, screws and other fasteners, springs, clips, washers, plastic connectors and many other items are often required in large quantities. Bulk commodities of this type are typically packaged in boxes or cartons.
In the past, inventory management of bulk commodities has been approached in different ways. One technique involves the customer receiving large shipments from a supplier and storing the boxes in a warehouse area of the customer's plant. The boxes are used when needed, and the customer must either reorder regularly or closely monitor the inventory status of each part and reorder when the part is in short supply. Ordering at regular times leads to excessive inventory levels which in turn requires excessive warehouse space. Ordering only when a part is in short supply requires considerable care in monitoring the inventory level and thus involves substantial labor cost. Mistakes are not infrequent and can create significant problems if important parts are unavailable when needed.
In recent years, an inventory approach that is commonly referred to as a "just in time" practice has become more prevalent. Using this approach, the inventory levels are minimized in order to minimize warehousing requirements. However, care must be taken to avoid running out of parts at an inopportune time.
The prevalence of leaner inventory levels has led to the development of at least two different ways of controlling inventory. One technique involves storing the parts in bins on the factory floor rather than in a warehouse. Although this reduces the storage requirements at the plant, the suppliers must exercise high levels of service in order to prevent shortages. Typically, it is necessary for suppliers to set up satellite warehouses near the facilities of the customer, and personnel employed by the supplier must closely monitor and service the inventory to maintain it at a low level while still always maintaining a sufficient supply on hand. Essentially, this simply shifts the warehousing and staffing needs from the customer to the supplier.
A second way of controlling inventory under a just in time approach makes use of encoding techniques to monitor inventory levels. The boxes of parts are provided with encoded labels which are scanned and entered into inventory when they are shipped to and reach the facilities of the customer. When the encoded boxes are withdrawn from inventory and used, they are scanned again so that the information as to the inventory level is kept current. This information can be used by the supplier to replenish the stock as necessary.
One problem with all of these approaches is that they are unable to respond quickly and reliably to events that can create inventory stock losses. For example, parts can be misplaced and are thus unavailable for use even though the inventory system indicates that they are present in inventory. Failure to scan boxes that are used also results in erroneous information in the inventory system. Parts can be used improperly in an application that calls for a different part, thus rapidly depleting the incorrect parts before they can be replenished. Errors or deliberate sabotage can cause all of these problems and others as well. Increasing reliance on the supplier for inventory control and lack of quick response times can result in failure of the inventory system and serious problems in the efficiency of the manufacturing operation.